How this calculation works
Liquidity ratios use different subsets of the same balance sheet. Current ratio includes all entered current assets, while quick and cash ratios progressively narrow which assets count toward the numerator. This page shows those definitions explicitly so an apparently similar ratio from another source can be compared by classification rather than by its label alone.
Current ratio = current assets/current liabilities; quick = (cash+securities+net receivables)/liabilitiesA worked example
The example has cash ten, securities twenty, receivables thirty, inventory forty, prepaid ten and other current assets ten. Total current assets are one hundred twenty against liabilities sixty. Current ratio is two, quick ratio one, cash ratio 0.5 and net working capital sixty. All four outputs use the same entered snapshot but answer different questions.
Good to know
Restricted cash, overdue receivables, maturity timing and contingent obligations are not adjusted automatically. Reclassify inputs only on a defensible consistent basis. The page provides no universal healthy-ratio cutoff, lending decision or solvency certification. Ratios describe entered classifications and do not forecast future cash inflows.
Reference: OpenStax — current ratio and working capital (opens in a new tab) ↗
What this calculation answers
Liquidity ratios use different subsets of the same balance sheet. Current ratio includes all entered current assets, while quick and cash ratios progressively narrow which assets count toward the numerator.
This page shows those definitions explicitly so an apparently similar ratio from another source can be compared by classification rather than by its label alone.
The Receivable aging expected allowance schedule calculator reconciles one net-receivable assumption. A liquidity ratio still needs consistent current-asset classifications and payment timing.
Use the right input conventions
Enter a consistent point-in-time scope in one currency. Receivables should already be net of the allowance appropriate to the scenario. Current liabilities must be positive for finite ratios.
Quick assets here are cash, marketable securities and net receivables. Inventory, prepaid expenses and other current assets are excluded from quick ratio; cash ratio includes cash plus marketable securities.
Interpret the result
Net working capital is the difference between current assets and current liabilities, not a ratio. Its currency amount can increase simply because the business is larger, even when its relative liquidity is unchanged.
A high current ratio does not prove that inventory can be sold or receivables collected before bills fall due. Asset classification and timing remain substantive assumptions rather than automatic evidence of payment capacity.
Work through the example
The example has cash ten, securities twenty, receivables thirty, inventory forty, prepaid ten and other current assets ten. Total current assets are one hundred twenty against liabilities sixty.
Current ratio is two, quick ratio one, cash ratio 0.5 and net working capital sixty. All four outputs use the same entered snapshot but answer different questions.
Where the model stops
Restricted cash, overdue receivables, maturity timing and contingent obligations are not adjusted automatically. Reclassify inputs only on a defensible consistent basis.
The page provides no universal healthy-ratio cutoff, lending decision or solvency certification. Ratios describe entered classifications and do not forecast future cash inflows.
A few questions, answered
Are inventory and prepaid costs included in quick assets here?
No. The stated quick definition includes cash, marketable securities and net receivables only.
What changes in the comparison?
Increase inventory without changing quick assets and compare which ratios move.